Toysmart Withdraws Customer Data Auction

In the absence of what it would deem an acceptable offer, Toysmart.com this week removed its customer database from auction.

Judge Carol Kenner granted the bankrupt e-tailer's request at a hearing in U.S. Bankruptcy Court in Boston.

The highest bid Toysmart received for the file was $50,000 from The Walt Disney Co., Toysmart's majority owner, which offered to purchase and retire the list from use. Reportedly, Toysmart's attorney tried, unsuccessfully, to persuade Disney to pay more for the database.

A claim filed by the Federal Trade Commission against Toysmart was settled July 21 when Toysmart agreed not to sell personal information as a stand-alone asset.

Also, 39 states asked the U.S. District Court in Massachusetts July 20 to prevent the defunct online retailer from selling the customer data at all. The states are prepared to dispute any sale of the data in which Toysmart customers would not be given the opportunity to opt out of the database.

According to reports, Judge Kenner sees merit in the case brought by the states and said she would have sustained the Massachusetts attorney general's objections in court.

Toysmart shut down its operations in May and filed for Chapter 11 bankruptcy protection in June. It had sought permission from the bankruptcy court to sell all of its assets, including its customer database, which includes names, addresses and credit card numbers. Privacy advocates argue that the action violates the company's privacy policy, which said it would never sell customer information.